What I Learned Helping a Relative with Financial Decisions

People often turn to loved ones in times of financial hardship. They might ask for a loan, financial advice, or help with budgeting or finding a job.

But I have a relative that recently asked for a different type of financial help.

Their financial circumstances suddenly changed, and they were utterly overwhelmed with indecision. So, they asked me to help them through some critical financial decisions.

My story: Helping a loved one with financial decisions

My loved one and I have openly discussed financial topics over the years. And our money talks revealed our mutual appreciation for frugality.

Yet our discussions also uncovered very different approaches to saving and investing.

My relative had a much more conservative approach to money than I do.

On investing, they focused on scarcity and fear of loss. And as a result, they limited their exposure to the stock market.

So, when I shared that my husband and I take a (very) different approach by investing a large percentage of our savings in the stock market, debates ensued.

We both held strong opinions and often tried to convince the other of the error in their thinking. But neither of us got anywhere; we agreed to disagree.

And it just so happened that the support my loved one asked for was about investing decisions.

They understood I was no expert but knew I had experience with my own investments. Plus, they trusted me to help them make the best decisions for them.

Yet, given our different views, I knew I must set aside personal opinions if I was to be of any help.

To support my loved one in making the best decisions for them, I would need to listen carefully. And I must help them dial in on their goals. 

The process took weeks of research, sharing resources, and regular conversations. Next, we consulted with a couple of financial advisors. Lastly, we laid out all available options. 

After a while, my loved one's decision became clear as we discussed their goals and options. Then, they felt empowered to move forward.

Despite our different philosophies, the process worked because of a few key factors. And it has more to do with open communication than financial viewpoints.

Related Reading: Do You Need a Certified Financial Planner, CFP®?

What I learned assisting someone with financial decisions

So, if you're ever asked to help someone with a significant financial decision, what I learned might be useful to you too!

Don't get me wrong – I made plenty of mistakes!

Sometimes I inserted my thoughts and opinions, which was never helpful. I had to remind myself that my loved one's decisions need to be their decisions – not what I would do in their situation.

Below are the key takeaways I learned through the process. These are things that helped me help my loved one with financial decision-making.

They have to want help: Respect their boundaries.

In any helping situation, there must be mutual respect for boundaries. So many times, boundaries are unspoken, but unclear boundaries leave each person guessing. So it's best to be honest and direct.

It was super important for my relative to be in control. So, I offered my support and told them to talk to me anytime. But I limited specific help to what they requested.

If they clearly did not want help, I respected that. But I could still offer to be there if they wanted to talk.

One caveat is that sometimes loved ones need help with their finances when they don't (or can't) ask for it. So, sometimes families have to step in when cognitive or health difficulties make it challenging for relatives to ask for help.

But my relative is healthy and capable of making and carrying out their own decisions. So, helping them was only appropriate because it was something they wanted.

Related reading: How to Best Help Aging Parents Financially

Open communication is essential.

My loved one is anxious about making financial decisions. And when they asked for help, they were overwhelmed and wished someone else would do it for them.

But, rather than taking over or telling them what to do, I asked many (many!) questions. And then, I listened for some key information. 

By asking questions, having discussions, and actively listening, I could better understand my loved one's mindset. And most importantly, their goals became clear. 

Because my relative's financial views are different than mine, sometimes I had to hold back my personal opinions. But the most exciting thing is that we discovered we weren't as far apart as we once thought.

Since we both allowed space for differing opinions, we had productive conversations.

In fact, at one point, my relative said, “I don't think we see things all that differently.” And I wholeheartedly agreed.

Related reading: Money Story: What it is and how it affects your finances

It’s best to keep it simple. 

Sometimes I got ahead of myself and shared too much information at once. 

But too much information at one time became paralyzing. It didn't give my loved one space to absorb everything. So, I learned to keep things simple. 

Ultimately I created a one-page summary of information and linked it to further reading. That way, they didn't need to read everything. But if they wanted to learn more, they could (and they did).

Defining financial goals is pivotal.

The most important part of the process was ensuring my loved one's needs were met. But, of course, that meant they needed to define their goals.

The thing is, they had never thought about their financial goals before. And this was a big part of their confusion about financial decision-making. 

Once they articulated what they wanted their life to look like, we could define their goals. And that’s when things fell into place.

We summarized the goals on a simple Investment Policy Statement (IPS). This sounds complicated, but it's not! It's a straightforward way to define financial goals. 

On their IPS, my relative's long-term goals are spelled out. It states where they are and where they want to be financially – and exactly how they will get there. Whenever we get off track, we circle back to their IPS.

Additional reading: Why and How You Diversify an Investment Portfolio

Seeing others’ empowerment is satisfying.

Armed with the necessary information, my relative started to see that they could make the best choice for them.

Now, they're making the decisions, and even better, they're taking action.

Watching them take steps toward their goals has been very satisfying. Things they once thought they could never do themselves – they are now doing on their own!

A note on legal issues

When helping someone with their finances, it's crucial to consider legal matters. You must obey the laws about how you offer your help and what help you provide.

Essentially anyone who manages someone else's money and gets paid for it must be registered with the SEC (Security and Exchange Commission). 

I'm not concerned about legal matters in my situation because:

• My relative understands that I'm not a financial professional.
• They manage their own money (I don't); I'm their sounding board.
• I'm not receiving compensation.

Final thoughts on helping someone else with their finances

Money is a taboo and sensitive topic for many people. So, helping someone else with their finances can be challenging – and it isn't for everyone. 

The three crucial takeaways from my helping experience are (1) respect boundaries, (2) define goals, and (3) use open communication (i.e., listen). 

We all know that telling someone how to do things doesn't work well. But if you listen to what they really want, they often find their own answers, maybe with some guidance along the way.

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